Consumer confidence rises for second month on jobs confidence, spending power

Cameron Bagrie, chief economist at ANZ National Bank

New Zealand consumer confidence extended last month's rebound from a six-month low, edging higher in July, supported by an improving labour market and the impact of a high kiwi dollar on import prices.

The ANZ-Roy Morgan consumer confidence index rose to 132.7 this month, from 131.9 in June and 127.6 in May. A reading above 100 indicates optimists outnumber pessimists. Those seeing a pickup in the economy as a whole in the next 12 months was steady at a net 34 percent, while those seeing good times over the next five years edged up 1 point to 38 percent.

Consumer confidence hasn't wavered in the face of a central bank raising interest rates and a housing market showing signs of levelling off, which ANZ New Zealand chief economist Cameron Bagrie attributed to an improving labour market and cheaper imported goods as a result of the high kiwi dollar. The Reserve Bank is widely expected to raise the official cash rate for a fourth time this year to 3.5 percent on July 24, though weak dairy prices and tamer-than-expected inflation may limit the extent of the tightening cycle.

"We're in an environment where interest rates have moved up and are projected to rise further, and the housing market has plateaued," Bagrie said. "Eyeballing the chart shows still-elevated levels of confidence. Despite this we're not seeing across-the-board spending largesse; consumers remain more prudent than they were prior to the global financial crisis."

A net 44 percent of those surveyed said it was a good time to buy a major household item, up from 42 percent last month. Those households saying they are financially better off than a year ago slipped to a net 9 percent from 13 percent, although those expecting to be better off in 12 months time improved to a net 40 percent from 34 percent.

The current conditions index slipped to 126.3 from 127.5 last month, while the future conditions index rose to 137 from 134.9 in June.

Inflation expectations jumped to 3.9 percent, the highest level since September last year, from 3.1 percent.

Confidence in Auckland and the North Island rose to the highest levels in six months, with the exception of Wellington, which fell from a seven-and-a-half year high in June. South Island confidence slipped to a seven month low and Canterbury confidence fell to an eight month low.


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